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If there are no resources, an economy cannot be sustained.

In this
lesson, you'll learn what economic resources are, the different
types of economic resources, and why they are vitally important. A
short quiz follows the lesson.

Definition of Economic Resources


Economic resources are the factors used in producing goods or providing services.
In other words, they are the inputs that are used to create things or help you provide
services. Economic resources can be divided into human resources, such as labor and
management, and nonhuman resources, such as land, capital goods, financial
resources, and technology.

Importance of Economic Resources


An economy is a system of institutions and organizations that either help facilitate or
are directly involved in the production and distribution of goods and services.
Economic resources are the inputs we use to produce and distribute goods and
services. The precise proportion of each factor of production will vary from product
to product and from service to service, and the goal is to make the most effective use
of the resources that maximizes output at the least possible cost. Misallocation or
improper use of resources may cause businesses, and even entire economies, to fail.

Human Resources
Labor is one of the classic factors of production, along with land and capital,
discussed by economists for well over a century. Even in today's technologically
advanced world, human labor is still needed to help process resources into products
or to utilize resources to provide services. Different types of labor include production
labor and service labor. An example of production labor is the classic factory worker.
Service labor includes people involved in providing a service, such as doctors,
lawyers, accountants, sales people, mechanics, and plumbers.

Management is another example of a human resource. As organizations became


more complex with the onset of the Industrial Revolution, employees were required
to oversee and manage the masses of workers engaged in the production process.
Management is a resource that is used to facilitate efficient and effective production
or operations of a business so that it can accomplish its goals. Rather than being
directly involved in production or services, managers coordinate, monitor and direct
employees engaged in the production or service. Examples of management include a
direct supervisor all the way up to the president of a large multinational company.

Nonhuman Resources
Land, like labor and capital, is a classic factor of production. Land is all real estate
and all natural resources on or in it, such as trees, minerals, elements, metals, gems,
natural gas, thermal heat, oil, coal, water, and crops.
Capital is the third classic factor of production and includes anything made by
human beings that can be used in the production of goods or in providing services.
It's pretty much any physical property that is not land or the natural resources on land
or found in land. A machine is a capital good, but a chunk of gold is not. Gold is not
man-made but rather a natural resource found on land.

Definition and Types/Classifications:

"Economic resources are those scarce resources which help in the production of
goods and services".

The economic resources are classified under two main heads:

(1) Property Resources and (2) Human Resources.

(1) Property Resources: In property resources, we include land and capital. The term
land is used to describe all natural resources which are used in the process of
production and yield income. These resources which are free gifts of nature include
agricultural land, forests, mineral deposits, fisheries, rivers, lakes, oil deposits, etc.

The term capital refers to all man made resources which aid to production. Thus
machinery, equipment, tools, factories, storage, transportation, etc., which are used in
the production of new goods and supplying them to the ultimate consumers are
capital resources.

(2) Human Resources: Human resources include labor and entrepreneurial ability.
Labor in economics refer to human effort, physical and mental which is directed to
the production of goods and services. Thus factory worker, clerk, typist, teacher,
doctor. Judge, physicist, etc., fall under the category of labor.

Itmay here be noted that it is the services of labor which are bought and sold for
money and not the labor itself. As regards the supply of labor, it depends upon the (i)
size of total population (ii) age composition of the population (iii) the availability
working population (iv) the working hours devoted to production (v) the
remuneration paid to the workers, etc., etc.

Economic resources are the goods or services available to individuals and businesses
used to produce valuable consumer products. The classic economic resources include
land, labor and capital. Entrepreneurship is also considered an economic resource
because individuals are responsible for creating businesses and moving economic
resources in the business environment. These economic resources are also called the
factors of production. The factors of production describe the function that each
resource performs in the business environment.

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Economic resources are the goods or services available to
individuals and businesses used to produce valuable
consumer products. The classic economic resources include
land, labor and capital. Entrepreneurship is also
considered an economic resource because individuals are
responsible for creating businesses and moving economic
resources in the business environment. These economic
resources are also called the factors of production. The
factors of production describe the function that each
resource performs in the business environment.

Land
Land is the economic resource encompassing natural resources found within a
nation’s economy. This resource includes timber, land, fisheries, farms and
other similar natural resources. Land is usually a limited resource for many
economies. Although some natural resources, such as timber, food and animals, are
renewable, the physical land is usually a fixed resource. Nations must carefully use
their land resource by creating a mix of natural and industrial uses. Using land for
industrial purposes allows nations to improve the production processes for turning
natural resources into consumer goods.

Labor
Labor represents the human capital available to transform raw or national resources
into consumer goods. Human capital includes all able-bodied individuals capable of
working in the nation’s economy and providing various services to other
individuals or businesses. This factor of production is a flexible resource as workers
can be allocated to different areas of the economy for producing consumer goods or
services. Human capital can also be improved through training or educating workers
to complete technical functions or business tasks when working with other economic
resources.

Capital
Capital has two economic definitions as a factor of production. Capital can represent
the monetary resources companies use to purchase natural resources, land and other
capital goods. Monetary resources flow through a nation’s economy as
individuals buy and sell resources to individuals and businesses. Capital also
represents the major physical assets individuals and companies use when producing
goods or services. These assets include buildings, production facilities, equipment,
vehicles and other similar items. Individuals may create their own capital production
resources, purchase them from another individual or business or lease them for a
specific amount of time from individuals or other businesses.

Entrepreneurship
Entrepreneurship is considered a factor of production because economic resources
can exist in an economy and not be transformed into consumer goods. Entrepreneurs
usually have an idea for creating a valuable good or service and assume the risk
involved with transforming economic resources into consumer products.
Entrepreneurship is also considered a factor of production since someone must
complete the managerial functions of gathering, allocating and distributing economic
resources or consumer products to individuals and other businesses in the economy.

Economists have long recognized


three distinct types of economic
resources that people use to create
the things they want.
Natural Resources, Human
Resources, and Capital Resources
are the three types of economic
resources, and they are also
referred to as "factors of
production".

Each resource plays


a unique role in the
production of goods,
and each resource is
clearly
distinguishable from
the other two.
For more
information about
each of the
resources, continue
to the next page.
Natural Resources
Natural resources
are defined as
everything in the
universe that is not
created by human
beings.
Air, sunlight,
forests, earth,
water and
minerals are all
classified as
natural resources,
as are all manner
of natural forces
or opportunities
that are not
created by people.
Human resources
use capital
resources on
natural resources
to produce wealth.
Every tangible
good is made up
of the raw
materials that
come from nature
-- and because all
people (and other
living things) have
material needs for
survival, everyone
must have access
to some natural
resources in order
to live.

Consider a simple product like a can


of chicken noodle soup. What natural
resources were used to produce it?
The chickens, vegetables, and spices
are the result of crops and livestock
grown on rich farmland.
The water is extracted from wells that
were filled by rain.
Aluminum was extracted from the
ground and used to produce the can.
But it takes more than just natural
resources to make a can of soup.
Read on to see how the other
economic resources play their part.

Human Resources
To make the gifts of nature
satisfy our needs and desires,
human beings must do
something with the natural
resources; they must exert
themselves, and this human
exertion in production is called
labor.
Everything that people do, to
convert natural opportunities
into human satisfactions --
whether it involves the exertion
of brawn, or brains, or both --
is labor, to the economist.
When natural resources are
worked up by labor into
tangible goods, which satisfy
human desires and have
exchange value, we call those
goods Wealth.
When labor satisfies desires
directly, without providing a
material good, we call that
"Services"; thus, economists
say that labor provides the
economy with "goods and
services".
Let's go back to our can
of chicken noodle soup.
Many people, or human
resources, are need to
complete the work
required to produce the
product.
Farmers raise the
livestock and crops.
Factory workers and
managers use equipment
designed by engineers
and manufactured by
other businesses to
process the food.
Truck drivers,
salespeople, advertisers,
and grocery store
employees are also
involved in producing
the product and making
it available to consumers
for purchase.

Captial Resources
When some of the wealth is
used to produce more wealth,
economists refer to it as
capital.
A hammer, a screwdriver, and
a saw are used by a carpenter
to make a table.
The table has exchange value.
The truck which delivers the
table to a retail store, the
hammer and other tools -- and
even the cash register -- are
all forms of capital.
Capital resources increase
labor's ability to produce
wealth (and services too).
Therefore, there is always a
demand for capital goods, and
some labor will be devoted to
supplying those goods, rather
than supplying the consumer
goods that directly satisfy
desires.
How do capital resources
help make our can of
chicken noodle soup?
Farmers use tractors and
other equipment to plant
and harvest crops, and
even to feed livestock
more efficiently.
Truck drivers wouldn't get
very far without their
trucks, and salespeople
need cars, phones,
computers and other
devices to make their
sales.
Grocery store employees
need shelves and label
makers to display the
soup and tell people how
much it costs.
So, you can see, it takes
all of the economic
resources to produce the
products that we all take
for granted.
Economic Resources: types and
definitions
There are four fundamental types of economic resources: Land, Labor, Capital,
Entrepreneurship

Economic resource 1: Land

Land is an economic resource that includes all natural physical resources like gold, iron, silver, oil etc.
Some countries have very rich natural resources and by utilizing these resources they enrich their
economy to the peak.

Such as the oil and gas development of North Sea in Norway and Britain or the very high productivity
of vast area of farm lands in the United States and Canada. Some other developed countries like
Japan have smaller economic resources. Japan is the second largest economy of the world but
reliant on imported oil.

Economic resource 2: Labor

The human input in the production or manufacturing process is known as labor. Workers have
different work capacity. The work capacity of each worker is based on his own training, education and
work experience.

This work capacity is matters in the size and quality of work force. To achieve the economic growth
the raise in the quality and size of workforce is very essential.

Economic resource 3: Capital

In economics, Capital is a term that means investment in the capital goods. So, that can be used to
manufacture other goods and services in future.
Following are the factors of capital:
Fixed Capital
It includes new technologies, factories, buildings, machinery and other equipments.

Working Capital
It is the stock of finished goods or components or semi-finished goods or components. These goods
or components will be utilized in near future.

Capital productivity
New features of capital building, machinery or technology are commonly used to improve the
productivity of the labor. Such as the new ways of farming helps to enhance the productivity of the
agriculture sector and give more valuable jobs in this sector which motivates people to come out for
work.

Infrastructure
It is a stock of capital that is used to maintain the whole economic system. Such as roads, railway
tracks, airports etc.

Economic resource 4: Entrepreneurship

The Entrepreneur is person or individual who wants to supply the product to the market, in order to
make profit. Entrepreneurs usually invest their own capital in their business. This financial capital is
generally based on their savings and they take risks linked to their investments. This risk-taking can be
rewarded by the profit of the business. Entrepreneurship is, thus, an important economic resource.

Following are the factors of Entrepreneurship:


Income
Wealth
Labor and Wages
Capital and Interest
Profit and Enterprise